For Brian Wallace, president of the Coin Laundry Association, many of the business decisions that come with running a laundromat should be framed by one question: What is your store worth? Even if you’re not planning on selling your store any time soon, what your store is worth can be helpful when determining whether to remodel or retool.
“I would say that even good operators often don’t have a good handle on what the store is worth,” says Wallace. “You should be selling the store when it’s worth the most. I think most owners sell when their store is worth the least.”
What he means by that is that many owners come to the decision to sell after years of not maintaining or investing in their store. It’s at that point that many owners are surprised to find out that their store isn’t necessarily worth what they originally paid for it, or what they paid for their equipment all those years ago. Or they’ve been looking at their gross income and not paying attention to what their net profit is.
Valuing your store.
Wallace recommends doing an annual valuation of your store or stores.
That said, there’s no one simple formula for determining the value of a laundromat business. Three common ones are the gross income multiplier, the net income multiplier and the store value multiplier methods.
- The gross income multiplier method calculates value as a multiple of a store’s gross income. That multiplier, usually between 1 and 2.5, can vary widely depending on your market and other variables.
- Unlike the gross income multiplier method, the more accurate net income multiplier method takes expenses into account. This method takes your annual net income (not including debt service and depreciation) and multiplies it by a factor that usually ranges between 3.5 to 5.5, again depending on your market and other variables.
- The store value multiplier method is based on a store’s average monthly income and takes several other factors into consideration, such as lease length and equipment age. This makes it a more accurate, but also more complicated, method.
“Even if it’s just on a yellow pad at your kitchen table. Talk to a business broker who knows the industry, or to your Maytag© Commercial Laundry distributor, whomever your go-to person is. Even if you just stick that valuation in a drawer, if you’re doing it every year, at least you’re tracking the ebb and flow of the value of your business.”
Knowing your net.
“The value of your business is based largely on the net profit. That net is not static. The water bill goes up, wages go up, suddenly your equipment’s getting a little older and you’re buying more parts. All of this impacts your net,” says Wallace.
Detailed records can improve the value of your store because they offer proof of a store’s net income and expenses. But because coin laundry is mainly a cash business, many owners don’t keep accurate records. Many owners also don’t track the hours they spend cleaning and doing repairs as expenses.
Knowing your store’s value means keeping accurate records of maintenance and repairs, as well as utility costs. If you haven’t been doing this, you may discover some opportunities for improvement you hadn’t considered before.
Your nearest Maytag Commercial Laundry distributor can help you maximize your laundromat’s value. One way they can do this is by using our replacement calculator tool. By entering your store’s equipment mix, vend prices and utility costs, your distributor can give you a detailed analysis of how replacing equipment could help you improve your business.